Are the PS4 and Xbox One really that expensive, historically?

Also, how soon and how much can we expect the new consoles to drop in price?

At E3 earlier this month, Microsoft and Sony both coughed up a lot of long-awaited information about the new consoles they want us to buy this Christmas. Sony was roundly declared the winner of this pre-release skirmish, making all the right noises about intellectual property, panopticonnectivity, and perhaps most importantly, price.

Game consoles are not inexpensive, and the PS4 undercuts the Xbox One by a significant $100. It also undercuts the $599, top-end release price of the PlayStation 3 by $200, showing a bit more price sensitivity this time around. Of course, those were 2006 dollars, which makes Sony's real price reduction for the PS4 even steeper.

This got me thinking about the effects of inflation on console prices in general. Is the Xbox One's $499 price really an outlier, or are we just disregarding how much less purchasing power a dollar has these days? How far back do we have to go before gaming machines were, generally, more expensive in real terms than they are now?

Finding myself in an analytic mood, I decided to try to come up with some answers. Starting with the Atari 2600, I've included the major players from each successive generation of gaming consoles (a few extremely niche home systems are left out for lack of market impact). For consoles that launched in multiple configurations (Xbox 360, PS3, etc) I've used the price of the top configuration at launch, and tried to stick with comparable configurations as time (and bundles) go on.

Price drop data was collected from a variety of contemporaneous and historical sources, from news stories to archived department store catalogs. In cases where a price dropped twice in a single year, the lowest sales price for that year was used. If you are the world's leading expert in Sega CD price fluctuations and have spotted a glaring error in the numbers please let me know. The inflation-adjusted prices were calculated using the Bureau of Labor Statistics calculator.

Enlarge/ The green bars show the original launch price, and the orange bars are the launch price adjusted to 2013 dollars.

Eric Bangeman

Lets take a look at those inflation-adjusted launch prices first. Here it becomes clear that Xbox One is at the high-end of real-money asking prices for systems on day one. While the system's $499 launch price is technically almost precisely at the inflation-adjusted average ($498.63, by our count), that average is skewed significantly by the insanely expensive 3DO, Neo Geo and CD-i, as well as high-priced systems from before the great video game crash of 1983. The Xbox One is above the inflation-adjusted price for all but two systems released since 1995, and above the overall inflation-adjusted median launch price of $421.75.

The PS4, on the other hand, shows what a difference $100 makes as far as historical comparisons. Sony's new system is the cheapest one the company has ever launched when measured in real dollar value, and it hovers right around the median inflation-adjusted price for consoles historically. Sure, the PS4's price doesn't compare well with Nintendo's systems, which are consistently priced very low at launch (especially once Sony brings the Playstation to the party). Still, it's hard to say that the PS4 is over-priced, at least compared to historical norms.

Of course, there's always the possibility that Microsoft could pull an Nvidia (or pull a Nintendo 64, if you prefer) and drop the Xbox One's price even before it hits shelves in November. Last week saw Redmond pivot toward Sony and away from their green-tinted E3 promises on quite a few points already. Announcing a price cut before the system even goes on sale, on the other hand, might not send the most confident message out to the wider public.

Enlarge/ This graph shows the relative cost of each console over its lifespan, with years on the horizontal axis and 2013 dollars on the vertical axis.

Eric Bangeman

Launch prices aren't the end of the story, though. A console that looks horribly expensive on launch day won't stay that way forever, though we'll probably have to wait quite some time before being able to pick up a PS4 for $99.99. Looking at inflation-adjusted prices over time shows that higher priced systems tend to drop more quickly and more sharply than those launched at lower prices, which slowly taper down over the years. Waiting a few years also often means getting a better spec. For example, in 2008 the 60GB Xbox 360 replaced the 20GB, and the 2010 price drop was for the Elite, which had replaced previous top-spec 360s. The PS3 also went through similar spec changes over time.

Enlarge/ This graph shows the decreasing (inflation-adjusted) price of each console as a percentage of its (inflation-adjusted) launch price.

Eric Bangeman

Aligning the price drops to each console's launch year splits the market into two groups of almost identical size. On one side are the consoles that dropped anywhere from 20 to 50 percent in price within just one calendar year of their launch. These tend to be systems that performed particularly badly out of the gate that used steep price reductions as a last-ditch effort at relevance, from the Atari 7800 and 3DO to the 32X and Dreamcast. While some relatively successful systems saw steep price drops in their first year, including the original PlayStation, most systems that were in it for the long haul don't drop to below 80 percent of their original price (in real money terms) until two or three years after launch (or sometimes more) tanking in the market.

After year one, though, the average console tends to dip to around 50 or 60 percent of its real-value launch price by its third year on the market, a trend that's been relatively consistent as time goes on (the Nintendo Wii is the most striking counterexample, dropping just over 25 percent in real price after four years on the market). Whether this trend continues depends largely on how competitive the market is this time around; note that the NES stayed at its $100 nominal price from 1988 through 1992, without much real damage to its dominant position.

All told, looking at economic history on a fair dollar-to-dollar basis shows that neither Sony nor Microsoft are launching well outside of historic norms, and that any sticker shock will probably be mitigated significantly by price drops like within two or three years.

My personal rule of thumb is this: a system must have 5 games I want to play before I buy it. That saves paying the early adopter 'tax' on just about all systems. And, that's 5 shipped games, not 5 announced games.

While the 360 was dropping its price and increasing HDD capacity (bringing the cost of the storage into the realm of pseudo-sanity) Sony was dropping the price and cutting features and ports. My phat bit the dust and the thing I miss the most is PS2 BC. So now I am thankful I have a PC good enough to run PCSX2.

The 360 also added HDMI, but it's easily argued that it should have had that from day one.

An amazing reminder of just how bad inflation was in the late 70's-early 80's. The 2600 and NES sold for almost the same dollar amount ($200 and $175 respectively) but in 2013 equivalent that's $768 for the 2600 and $432 for the NES just 8 years apart.

One slight problem with using real dollars in comparison is that it assumes that average purchasing power has stayed the same. So yes, the prices might be relatively similar over the long run, but the ability of people to buy them has been curtailed by the recession and rising inequality.

My 3DO and I still feel the pain of that price tag. On the other hand, bought more games for it / spent more time playing on it than any other console I've bought (regardless of perceived quality of the games), so perhaps money not so badly spent.

Inflation alone does not tell the whole tale as to why people are up in arms with pricing. More tech and gadgets demand our entertainment dollars these days ($600 phones, $80 plans, expensive broadband, rent/food prices rising faster than wages, stagnant wages, etc).

Wow, the 3DO was $700 at launch, over $1100 in today's dollars....no wonder it did so poorly.

Uh no, that played very little part IMHO. They misunderstood their market, and were out either to late, or to early. The media they used weren't "understood" yet, same fate that happened to Commodore CDTV and Philip's CDi, and when it was, hello Sony Playstation and Commodore CD32.

The Neo Geo did fine for example because they understood their market.

If the Wii has shown anything, it is that a "good" system that is also cheap can mean a TON of sales.Yeah the price wasn't the 3DO's only problem, but most people didn't even know the 3DO's other problems because that $700 price point caused sticker shock.

So the gist I'm getting is, wait 2-3 years to let prices and games get all sorted out before buying my next console. Nothing new here, it was what I was planning to do anyway.

That is what i plan to do as well, bought my ps3 last year and still have few more years until it die. Then i will replace it with the PS4, which i assumed it will be at least $100 dollars cheaper, putting the price around $299

I think the question here is not whether the new consoles compare favorably to the cost of old consoles, but whether ANY console can succeed at the old price points in an age where we all carry game consoles loaded with 99 cent games in our pockets.

I think the question here is not whether the new consoles compare favorably to the cost of old consoles, but whether ANY console can succeed at the old price points in an age where we all carry game consoles loaded with 99 cent games in our pockets.

If the 99 cent games on your phone were anything close to those available on consoles, I would agree. Right now, the best cell phone games are still miles behind a below average console game.

Great article, thanks. I remember as a kid my parents bought me an Atari 2600. To a kid it was phenomenal piece of technology at the time. Man, you could play games in your house and everything (not to be confused with room, as most houses only had one TV)! My cousin later got the vastly superior Intellivision and to be honest I might have been a bit jealous at the time. I never could understand why my parents politely set aside or diverted my youthful requests to get one too.

As an adult with a couple kids of my own now, a corresponding budget, and in reading about the price adjusted dollars these units cost at the time, I think I understand my parents a little bit better. Thanks!

Another part about how 'expensive' a console is relies on the consumer’s budget. I'll throw in a fair warning here that the rest of this will be anecdotal.

Most people I know don't have a gaming/console budget. Instead we tend to have an 'entertainment budget' which is a portion of our discretionary income. Our entertainment budget can include anything and everything from music purchases, trips to the theater/cinema/plays, cable/satellite packages, gaming, and outdoor activities.

When thinking about where to spend my money, more investment in one area listed will take away from another...assuming I spend my money responsible and stick to my budget. If one area can serve the needs of multiple entertainment options, it’s less expensive to me even though the cost is more. The additional value makes up the rest.

All that considered I think the current generation of consoles do represent pretty good value for what the offer but Sony is the clear winner here in terms of cost, value, and how 'expensive' it is.

Edit: I forgot to mention that I really enjoyed the article. It was well done and looked at a side of gaming/technology that I expect from here.

I think the question here is not whether the new consoles compare favorably to the cost of old consoles, but whether ANY console can succeed at the old price points in an age where we all carry game consoles loaded with 99 cent games in our pockets.

If the 99 cent games on your phone were anything close to those available on consoles, I would agree. Right now, the best cell phone games are still miles behind a below average console game.

Its hard to beat Plants vs Zombies or Angry Birds. There are games with million dollar budgets similar to Plants vs Zombies that are not as fun for a varity of reasons.

You are indeed correct though that most o the games on Android and iOS are unable to go up against console games, but when you sell 5 million $0.99 units does it matter on the business side?

It's very interesting to read through this and consider these costs as they related to my parents, and not me who was too young to consider the realities of prices. Kinda puts it into perspective when I balk a bit at a $400 price tag to think, yeah that $200 NES system in 1985 pinched my parents a bit too.

Also puts into perspective the reality that, being born in 1978, i've been coasting along with the entire console lifespan, so these diagrams hit home a bit.

I bought my 360 Premium in 2007 after the summer price drop, when it went down to $400 Canadian. The launch price was $500, and in the intervening two years the Canadian dollar had reached parity with the US dollar but prices hadn't adjusted to compensate. So, it took two years just for us to reach the point where those of us up in the Great White North could grab a 360 for the US launch price without heading down across the border! This was around the time that the Elite came out too, for a price of... $500. Hopefully this time around they keep the Canadian price the same as our neighbours to the South!

I think the question here is not whether the new consoles compare favorably to the cost of old consoles, but whether ANY console can succeed at the old price points in an age where we all carry game consoles loaded with 99 cent games in our pockets.

If the 99 cent games on your phone were anything close to those available on consoles, I would agree. Right now, the best cell phone games are still miles behind a below average console game.

This is an argument as old as computers. Simple graphics and low power generally make for a simpler game but also allow developers to concentrate on 'fun' rather than 'wow that looks amazing'. I can guarantee I have had more fun playing "Match Day 2" on the ZX Spectrum than all of the Fifa's for the last 20 years combined. That was a game written by two people - one of whom was the artist.

Wow, the 3DO was $700 at launch, over $1100 in today's dollars....no wonder it did so poorly.

Uh no, that played very little part IMHO. They misunderstood their market, and were out either to late, or to early. The media they used weren't "understood" yet, same fate that happened to Commodore CDTV and Philip's CDi, and when it was, hello Sony Playstation and Commodore CD32.

The Neo Geo did fine for example because they understood their market.

If the Wii has shown anything, it is that a "good" system that is also cheap can mean a TON of sales.Yeah the price wasn't the 3DO's only problem, but most people didn't even know the 3DO's other problems because that $700 price point caused sticker shock.

It did sell 2 million units, its failure is more in "what could have been" and against the consoles it rapidly had to compete with once the media it used was utilized, namely the SEGA Saturn and Sony Playstation.

The FM Towns Marty launched at the same time at 660USD btw., and AFAIK did perfectly fine.

I didn't realize intellivision had that much of a lead on the collecovision. I'd be interested in the price of the intelivision 2 because that was the first console I had.

My parents were not hip to the idea and I saved and saved and saved, originally I was saving for a 2600. By the time my 10 year old self had managed to hide the money away I found a deal on intellivision II and was amazed at what the tv could do. pitfall harry was graphically amazing.

Then my cousin got a collecovision. donkey kong jr in your house and it was just like the arcade!

console gaming has come a long way. I've always had a nintendo machine but never a hand held.

I had a family friend with a four game pong unit and was hooked on video games ever since. At 40 it's still my go to hobby. Skiing was far more expensive, when I was in my prime I spent quite a few years as a skibum and I'll admit it took away console gaming for those years of my life but the computer was always there. the season pass for one year is like buying xbox1 and ps4 together. Skis last two seasons if your going 80+ days a year, boots tend to last if you get a pair that fits and you like them. Today's sports fans spend a pretty penny on seats to those games, I can't believe how things have gone up.

Gaming is a relatively cheap hobby and one that work well with my aging heavily abused body. I already have a Wii U and haven't touched my 360 since, however Monster Hunter is the only reason I have it and the only system selling game for me personally. Because of that I'll not be buying a xbox1/ps4 right out of the game. There's rumors that monster hunter online is going to see some kind of international release and I can only hope capcom share's more of this brilliant game with the rest of the world. Japan has it good.

Here's the problem. Most people's income has not grown with inflation. You can argue about prices in 2013 dollars, but most of us aren't getting paid in 2013 dollars.

That graph is real income. It should account for inflation.

Here? I haven't reviewed the data for accuracy, but it looks like adjusting for inflation we have the same purchasing power for anyone in the bottom 60%, with of course the difference being that game consoles are dramatically cheaper than any time except the late 90s, again inflation adjusted.

One slight problem with using real dollars in comparison is that it assumes that average purchasing power has stayed the same. So yes, the prices might be relatively similar over the long run, but the ability of people to buy them has been curtailed by the recession and rising inequality.

Cue the "EVERYONE NEEDS TO PULL THEIR SELF UP BY THEIR BOOTSTRAPS!" crowd to make sure we all know the fact that the majority of people aren't being paid as well now as the average person was in 1980 are at fault for not performing magic.

Inflation alone does not tell the whole tale as to why people are up in arms with pricing. More tech and gadgets demand our entertainment dollars these days ($600 phones, $80 plans, expensive broadband, rent/food prices rising faster than wages, stagnant wages, etc).

Something else to consider is changing audience. Casual/mainstream is the norm today as opposed to enthusiasts/hobbyists.

What astounds me the most about this day and age is that people think nothing about spending $600 or more on a phone/gadget that can easily be lost, damaged or stolen, not to mention the data and network costs of owning and operating one. I suppose that they are multi-use, and I may be too pragmatic or poor to understand it, but I find it difficult to see the value in some of these devices.

My 3DO and I still feel the pain of that price tag. On the other hand, bought more games for it / spent more time playing on it than any other console I've bought (regardless of perceived quality of the games), so perhaps money not so badly spent.

To this day there's not been IMO a better Need For Speed than the original on the 3DO. Even the PS1 version of NFS1 didn't feel as good.

And I definitely miss "Wing Commander Wednesdays"

I only paid 400 for it though, so that's not too bad.

One thing about the article though: The first chart is fine, but the remainder are a data visualization nightmare. Surely a table would have fared better if you want to actually get the information across.

You are indeed correct though that most o the games on Android and iOS are unable to go up against console games, but when you sell 5 million $0.99 units does it matter on the business side?

I would argue that, from the business side, the $0.99 game is better. Those games are cheap to produce, so a flop doesn't sink your company. I was originally arguing from the consumer side. It's funny how depending on perspective what is "better" may be complete opposites.

My 3DO and I still feel the pain of that price tag. On the other hand, bought more games for it / spent more time playing on it than any other console I've bought (regardless of perceived quality of the games), so perhaps money not so badly spent.

To this day there's not been IMO a better Need For Speed than the original on the 3DO. Even the PS1 version of NFS1 didn't feel as good.

And I definitely miss "Wing Commander Wednesdays"

I only paid 400 for it though, so that's not too bad.

One thing about the article though: The first chart is fine, but the remainder are a data visualization nightmare. Surely a table would have fared better if you want to actually get the information across.

i think i paid 300 for my 3DO. yeah need for speed and road rash were OMFG!!! back then. i haven't hooked mine up in ages. one day though... one day i'll have the space.